Dow 22K and the ‘Trump Infamy Ecosystem’ Investors continue to have a different view than most journalists about the health of America. James Freeman
https://www.wsj.com/articles/dow-22k-and-the-trump-infamy-ecosystem-1501697057
The Dow Jones Industrial Average rose above 22,000 for the first time on Wednesday. “ Donald Trump is loving the stock market these days,” observes the Journal, which adds that Wednesday’s milestone “marks a rise of precisely 20% since Mr. Trump was elected in November. Assuming the blue-chip index closes above 22000, it will have taken just 183 days to do that, the fastest jump of 20% after a new president was elected since George H.W. Bush in 1988, according to WSJ’s Market Data Group.” But how much credit does Mr. Trump deserve?
The investor euphoria after Mr. Trump’s election has bumped up against the reluctance of Republican legislators to enact significant reform. After several GOP senators broke their promises last week to repeal ObamaCare, now the Washington Post says, “The White House’s push to quickly pass a major package of tax cuts through Congress is facing a fall calendar full of legislative land mines, potentially delaying a key part of President Trump’s agenda into at least 2018.”
These days many investors argue whether the rising market is still being driven by optimism about the Trump agenda or simply by rising corporate sales and profits thanks to improving global growth. Monetary policy has also left the financial system awash in cash looking for assets to buy. And then there’s the thesis from Brian Reynolds of Canaccord Genuity that as long as pension funds continue to buy huge volumes of corporate bonds, those corporations will continue to have the cash to buy back their own stock and keep markets grinding higher. He points out that credit investors “bought a record amount of corporate bonds in July.”
Whether the stock market boom is largely driven by one of these factors or some combination, it’s clear that investors continue to be much more optimistic about the United States than most journalists, who write daily on the latest alleged signal from Washington that civilization is heading into an abyss.
Mr. Trump certainly runs a risk in pointing to the markets as an arbiter of his performance. The Journal notes:
Stock-market strategists have warned that hitching his administration to the market may be dangerous. After all, big gains in the Dow during the early months of a presidency don’t always equate to big gains during the rest of the presidency. The fastest 20% rise following the election of a new president was the 63 days it took after President Herbert Hoover’s win in 1928.
But Donald Luskin of Trend Macrolytics thinks Mr. Trump has every right to take credit for rising markets. In a note to clients this week he acknowledges the view of many investors that “all of the pro-growth hopes and dreams that flourished right after Trump’s surprise election have now been crushed by the swamp, and Trump’s own seeming self-destructiveness.”
Mr. Luskin has a different view and writes that booming U.S. stock markets probably represent a “rational recognition that, since Trump took office, many pro-growth hopes and dreams have already become reality.” Mr. Luskin continues, “We’re not trying to be either cheerleaders or partisans here. But it’s a reality that a great deal of pro-growth progress has been made.” He ticks off a list that includes pipeline approvals, the rollback of various Obama-era rules, and the hiring of deregulators to run the EPA, the FCC and other federal agencies. CONTINUE AT SITE
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